By RICHARD BARLEY
Euro-zone politicians may be fiddling while Athens burns. Tuesday's meeting of finance ministers brought no progress on how to address Greece's funding problems and avoid setting off a financial crisis. But conditions in European markets are deteriorating. The main risk from Greece has always been contagion, and that process is already under way.
Most directly, prices of Portuguese and Irish bonds have fallen sharply, with 10-year yields rising above 11% and the cost of insuring their debt at record levels. The gap between Spanish and German 10-year bond yields is at its widest since January. The market is effectively giving no credit for any reforms or budget policies set out in the past six months.
The next link in the chain, the banking system, has been affected. In Spain, progress by banks on regaining market access has gone into reverse: Average borrowing from the European Central Bank jumped to €53 billion ($76.32 billion) in May from €42 billion in April.
Meanwhile, the contagion into core banks may be being underestimated by investors. Moody's on Tuesday said it could downgrade France's BNP Paribas, Société Générale and Crédit Agricole due to their holdings of Greek debt, and the ratings firm is looking at whether other banks could face similar risks.
When German Finance Minister Wolfgang Schäuble last week proposed a seven-year maturity extension for Greek bondholders, setting up the current standoff with the ECB, he suggested there was a chance to minimize the negative impact on financial markets. That was always an optimistic hope. The reality is that markets are starting to wake up to the risks of a Greek debt restructuring. Europe's politicians need to act fast to stem the tide.
7 σχόλια:
I can understand the people's frustration in Greece; but it seems, to me atleast, that alot of them dont really understand consequences of not cutting spending and public benefits. If greece defaults then all the money lent them from the other euro-zone countries just disapears, I'm sure countries like Germany, who are absolutly sick of bailing out the Greeks, would sooner just kick Greece out of the euro-zone then just keep lending them money they'll never see again. Besides when the leader of your country is willing to resign and sacrifice his career for something you can be pretty sure that its for a good cause.
They aren't going to be able to pay it back under the current structure. The currency/trade mechanisms aren't working properly. Its sad but true. The Germans should allow them to default but restructure and accept payment in an index-based security which will prevent the Greek from "printing" their way out of the crisis. Greece won't be able to buy anything from abroad for a while but a weak domestic currency will boost the Greek economy and give them the means to pay everything back over time.
So what exactly will happen if Greece defaults? Not much. The Banks will lose money, so they are trying to paint a picture of Armageddon! But Banks do not produce a single penny in wealth. They leach off the productivity of others. As long as we have petroleum, engineers, farmers... civilization will continue. If all the Bankers were lined up and shot, civilization, after a little confusion, would go on just fine. But without farmers, engineers and doctors and ... the working people, civilization as we know it will stop.
Ben Bernanke used the 'boogie-man' tactic to bail out his pay-masters, the Banks, in the USA. Bernanke had claimed that if AIG or GoldmanSachs go under, the world will come to an end. Americans are naive, and poor in math. So Bernanke and his FED got away with a trillion dollar theft. The Banks paid themselves record bonuses while being bailed out. US Tax payer money ended up with prostitutes that the Bankers blew their bonuses on. Bernanke represents the tip of the Banking Guild. But what if AIG had failed. US Farmers would still farm, engineers and doctors and all the other working people would still work, and produce wealth.
This bailout has little to do with Greece and everything to do with the Banks. In USA Bernanke, acting as a mole of the Banking industry, bailed out the Banks. In europe things are not so easy for ECB, ... because the Germans are not so naive.
Greece should default, and absolutely nothing will happen, ... except some really pissed off Bankers, who would be whining about their bonuses for a while. They can probably go and beg Bernanke for money :) Given how naive Americans are, maybe Bernanke will print some dollars for them too!
Its time to face the music. The European Monetary Union is a failed experiment. When an insignificant country like Greece can roil the worlds economies, there is something majorly wrong. And if it wasn't the Greeks there are the remaining PII(-G)S that could do the same. I'm sure this is all a currency traders wet dream, but to the rest of us, this is bringing us unnecessary anxiety. The EMU needs to jettison the weak members and allow them to float their own sovereign currencies again so that their poor fiscal policies will not adversely affect the world economy. And for those who say the US is next in line, lets be realistic. The US 10 year bond is ~3%. The Greek 10 year bond is ~17%. One is sustainable, the other is not (not saying that we don't have our own problems, but 3% sovereign debt is historically quite low).
OP TEN REASONS FOR US TO BAIL OUT GREECE:
10. Their national poet is the namesake of Homer Simpson.
9. Debt is our Achilles heel.
8. They'll give us a discount on Trojans.
7. We don't need the money.
6. They'll agree to let Eric Holder try KSM in midtown Athens.
5. They'll give Anthony Weiner free internet access.
4. They'll show us how to make ouzo.
3. They'll give us the remedy for an ouzo hangover.
2. They'll give our public employees lessons in collective bargaining.
1. They'll make Barney Frank the Governor of Mykonos.
If you want to know what the Greeks that are NOT demonstrating and rioting think, read this from one of their newspapers.
The hopeless charm of solitude
By Nikos Konstandaras
At a time when the Greeks are truly at the center of the global debate, when we are indeed the “navel of the world,” we want nothing more than to be left alone. We want to ignore the fact that everyone -– partners, friend and enemies -- are concerned about us either because they fear that we will not return the money they have lent us and that our disease may spread to other countries and poison the global economy. We want to forget that we are part of the world, that we got into trouble because we participated in the global economy by borrowing mindlessly, without thinking that when the time for payment came the pain would be all ours.
The crowds in the streets are charmed by the idea that everything would be fine if the foreigners would just let us alone. “We don't owe anything, we won't pay,” they declare, in an effort to make both the debt and our creditors disappear. On another dimension, Prime Minister George Papandreou believes that the markets and foreign analysts are to blame for the country's uphill battle. “Leave us alone. We know we have problems, leave us alone to deal with them,” he told a recent OECD conference in Paris. The leader of the main opposition party, Antonis Samaras, visited Paris and Brussels last week, where he expressed his own desire to be left alone -- alone, that is, to reject the austerity and reform program imposed on Greece by its creditors in return for lifesaving bailouts.
All the parties, along with the “indignant” crowds in our squares, want to be left alone. But we are not left alone. Earlier this month, on June 7, the leader of the world's largest economy, Barack Obama, and the leader of Europe's powerhouse, Angela Merkel, spent a good deal of time discussing Greece's debt problem. Not because they feel sorry for us but because they fear us. “Through the global financial and economic crisis, we’ve seen how interdependent we are”, Merkel told a joint news conference with Obama. “And the stability of the euro zone is therefore an important factor of stability for the whole of the global economy. So we do see clearly our European responsibility and we’re shouldering that responsibility together with the IMF. We’ve seen that the stability of the euro as a whole will also be influenced if one country is in trouble. And that is what this assistance is all about.” That's why, despite the protests of many politicians and the German public's anger, Merkel's government managed to get approval from Parliament for a second bailout package for Greece.
Whether or not a growing number of Greeks believe that the current economic policy is wrong and is aimed only at sucking the blood of taxpayers to the benefit of the permanently privileged (Greeks and foreigners), the fact is that other countries and organizations are trying to support Greece. Whether this continues up to the point where we can stand on our own feet, where we don't need to borrow every month in order to pay wages, pensions and interest on our loans, or whether it ends at the point when the others no longer fear our collapse is a matter of time. One of the two will happen.
For all these reasons, and while our partners still support us (for whatever selfish or selfless reasons), we would do well to act as if were already on our own. We must find the strength to work together and find a way to pull our own weight. Only then will we not need anyone.
t takes two to tango. Creditors were foolish enough to lend Greece more than Greece could ever possibly repay. When investors make stupid bets, they should expect to lose money.
The Greeks would be better off defaulting than accepting an IMF bailout / austerity measures. If the Greek government put the interests of the Greek people first and the interests of foreign creditors second, that is exactly what Greece would do.
The Greeks are right to strike. Their own government doesn't care about them.
If only people in the U.S. could realize what people in Greece, the UK, France, Portugal, Spain, and Italy already know, we would be out in the streets protesting the austerity measures that are now being imposed on us!
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